Europe’s biggest economy shrank for a second year in a row in 2024, according to data released on Wednesday by the Federal Statistics Office.
ADVERTISEMENTGermany’s economy contracted by 0.2% last year after shrinking by 0.3% in 2023, latest data showed.
“According to first calculations of the Federal Statistical Office (Destatis), the price adjusted gross domestic product (GDP) was 0.2% lower in 2024 than in the previous year. The decline in economic performance in Germany also amounted to 0.2% after adjustment for calendar effects,” a Destatis press release said.
“Cyclical and structural pressures stood in the way of better economic development in 2024,” Ruth Brand added at a press conference held in Berlin on Germany’s 2024 gross domestic product.
“These include increasing competition for the German export industry on key sales markets, high energy costs, an interest rate level that remains high, and an uncertain economic outlook. Against this backdrop, the German economy contracted once again in 2024,” Brand continued.
Marked decline in manufacturing and construction
After adjustment for price effects, whole economy gross value added fell by 0.4% in 2024, with significant differences in the performance of individual economic sectors.
“In manufacturing, output was down and gross value added dropped significantly (-3.0%) compared with the previous year. In particular, key sectors like the manufacture of machinery and equipment or the automotive industry saw a marked decline in production. Production remained at a low level in energy-intensive industrial branches, which include the chemical and metal-working industries for example. In 2023, production had decreased considerably owing to the sharp rise in energy prices,” Destatis also noted in its press release.
In the construction industry, the year-on-year decline in gross value added in 2024, at -3.8%, was even somewhat more pronounced. In particular, with construction prices and interest rates remaining high, fewer residential buildings were built.
“Building completion work also faced a drop in output. By contrast, the modernisation and new construction of roads, railways and pipelines led to an increase in the civil engineering sector,” Destatis also noted.
However, the service sector registered positive growth overall in 2024 (+0.8%), the performance of the individual branches varied. For example, gross value added in the aggregated economic sector of trade, transport, accommodation and food services stagnated. Although, while the retail sector and providers of transport services each reported growth, the motor vehicle trade, wholesaling and food and beverage service activities experienced a drop in performance compared with the previous year.
“Gross value added of business services also stagnated. The information and communication sector, on the other hand, continued to grow (+2.5%). There was also a steady rise in the sectors of the economy that are closely linked to general government: apart from public administration itself, continued growth was also reported in the areas of education and public health. Taken together, the gross value added of these sectors increased substantially on the previous year (+1.6%),” the Federal Statistical Office also said.
Pending snap election and economic hurdles ahead
The latest data comes just weeks ahead of the country’s crucial snap election with the challenge of fixing Germany’s economy high on the agenda. Stagnating growth, fiscal uncertainty, geopolitical risks, high energy costs, and a weakening automotive sector all adding to the country’s woes – and without reforms to unlock structural investments and bolster competitiveness, Europe’s largest economy risks prolonged malaise.
